Blimey, that's the skipper climbing into a life-boat!

That nautical analogy more or less summed up my feelings when I read this via CityWire: 

Bill Gross dumps $28bn of US government bonds

Who he, you might ask?  Well, he happens to be the boss of the world's largest investment fund and he has, in effect, asked for his hat and coat and the direction to the nearest exit!  As of last month he owned $28.6 billion of US Treasuries and today he owns zilch - nada - nought - nil.  I cannot help wondering what he knows that we do not.  The answer is that we all know but most of us choose to ignore it and hope it will go away, that is, we know that the US Treasury driving its printing presses into smoking wrecks in their non-stop efforts to churn out yet more trillions of dollars is, if I may return to sea, the equivalent of the master of the Titanic not so much taking a wrong course and hitting an iceberg but actually aiming for one and, furthermore, ordering full steam ahead!

According to CityWire, the Pimco fund has steadily moved into cash raising its cash holding from $11.9 billion to $54.5 billion.  One commenter at the site reckons Gross's next move will be into gold and/or commodities.  Should Bernanke bite the bullet and stop printing dollar bills (if Obama allows him) you can expect the value of US Treasuries to drop like a lead weight, followed by stocks and shares and, lo, there will be much wailing and gnashing of teeth! 

Comments

[Atlanta Roofing]

I heard awhile back that he was changing the charter on his PIMCO Total Return Fund so that he could invest in preferred stocks. This might be an interesting area to look into.

[Umbongo]

If he reckons interest rates are going up (you don't need to be a genius to see that) then the market value of US bonds will drop so selling is the appropriate reaction. It's not, as they say, rocket science. That he might get out of $-denominated paper is another issue: he'd be right because if the Fed keeps on printing money then - despite what "expert opinion" might say in Threadneedle Street and elsewhere - inflation will follow and the $ will weaken.

On a tangential point, our very own money-printing governor of the BoE told us that "it wasn't me" when the banks went haywire. As a letter writer (in the Telegraph, I think) wrote: King was the Governor of the Bank of England - not its janitor - why did he say or do nothing? Or worse - why did he encourage Brown's fantasies until the very last moment? What everyone conveniently forgets is that King was one of the signatories to the letter from 364 economists who (incorrectly) predicted ruin in the early days of the Thatcher goverment.

http://www.telegraph.co.uk/comment/personal-view/3623669/How-364-economists-got-it-totally-wrong.html

[David Duff]

Yes, investing would be such a doddle but for the timing problem! As to your last point, it is, alas, yet another example of the degeneration of our ruling class whose only abiding thought is how to cling to their jobs for ever. I hadn't realised that King was one of the 364 'useless idiots' but it explains a lot.